U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _________ to _________
Commission file number: 000-23105
AMERICAN INDEPENDENT NETWORK, INC.
(Exact name of small business issuer in its charter)
Delaware 75-2504551
(State or Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification No.)
6125 Airport Freeway, Suite 200
Haltom City, Texas 76117
(817) 222-1234
(Address and telephone number of principal executive offices)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months ( or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. As of October 12, 1999 there
were approximately 19,007,466 shares of the Company's Common Stock issued and
outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Balance Sheet at September 30, 1999 (Unaudited) and December 31, 1998
(Audited)
Statement of Operations (Unaudited) for the Nine Months ended September 30,
1999 and 1998
Statement of Stockholdders' Equity (Unaudited) for the Nine Months ended
September 30, 1999 and 1998
Statement of Cash Flows (Unaudited) for the Nine Months ended September 30,
1999 and 1998
Notes to Comparative Financial Statements (Unaudited)
1
<PAGE>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
September 30,
ASSETS
1999 1998
----------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 254,409 $ 18,145
Accounts receivable 1,088 45,506
Trade credits receivable 30,000 30,000
Note receivable, net of
doubtful account of $700,000 0 0
----------- ----------
TOTAL CURRENT ASSETS 285,497 93,651
----------- ----------
PLANT, PROPERTY AND EQUIPMENT
Leasehold improvements 22,851 22,851
Equipment and furnishings 144,468 131,020
Digital compression equipment 852,152 845,092
----------- ----------
1,019,471 998,963
Accumulated depreciation (253,008) (156,442)
----------- ----------
TOTAL PLANT, PROPERTY AND EQUIPMENT 766,463 842,521
----------- ----------
OTHER ASSETS
Deferred tax benefits 0 475,724
Trade credits receivable, net of
allowance of $125,138 201,990 241,990
Other investments 461,037 1,067,748
Note receivable, net of doubtful
account of $884,595 0 0
----------- ----------
TOTAL OTHER ASSETS 663,027 1,785,462
----------- ----------
TOTAL ASSETS $1,714,987 $2,721,634
----------- ----------
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
September 30,
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 490,977 $ 210,233
Notes payable 1,561,979 2,478,083
Accrued interest - notes 439,248 343,652
Advances from affiliates 10,738 22,338
Interest due preferred shareholders 37,440 37,440
Equipment lease payments 175,380 175,380
------------ ------------
TOTAL CURRENT LIABILITIES 2,715,762 3,267,126
------------ ------------
LONG TERM DEBT
Deferred income tax 0 0
Equip lease payments 36,002 120,314
------------ ------------
TOTAL LONG TERM DEBT 36,002 120,314
------------ ------------
TOTAL LIABILITIES 2,751,764 3,387,440
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock - 1,000,000 shares $1 Par
Authorized - 1998 42,427 shares issued,
1999 42,427 shares issued 42,427 42,427
Common Stock - 20,000,000 authorized
1998 issued 18,465,199 @ $.01 par 165,867
1999 issued 18,205,229 @ $.05 par 910,261
Additional Paid in Capital 5,326,243 4,337,929
Retained Earnings (Deficit) (7,315,708) (5,212,029)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (1,036,777) (665,806)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 1,714,987 $ 2,721,634
------------ ------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Operations (Unaudited)
For the Nine Months Ended September 30,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Income from network operations $ 88,223 $ 228,545
------------ ------------
COST AND EXPENSES:
Satellite rental 326,300 270,000
Programming expenses 1,076 5,203
Production expenses 91,361 77,493
Depreciation 59,000 40,860
Amortization of leasehold 1,000 3,600
Amortization of Senior Channel 103,452 103,452
Rental Expense (Net) 72,868 48,609
Administrative expenses 212,429 423,030
------------ ------------
TOTAL COST AND EXPENSES 867,486 972,247
------------ ------------
NET (LOSS) FROM OPERATIONS (779,263) (743,702)
------------ ------------
OTHER EXPENSES:
Interest expense (net) 204,544 294,389
(Gain) Loss on disposal of assets (15,953) 4,565
------------ ------------
Total Other Expense 188,591 298,954
------------ ------------
(LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (967,854) (1,042,656)
INCOME TAX BENEFIT (EXPENSE) 0 0
------------ ------------
NET (LOSS)BEFORE EXTRAORDINARY ITEM ( 967,854) (1,042,656)
EXTRAORDINARY ITEM
Cost of Conversion of Bridge Loans
To Common Stock 39,624 33,650
------------ ------------
NET (LOSS) $(1,007,478) $(1,076,306)
------------ ------------
EARNINGS PER SHARE OF COMMON STOCK $ (0.06) $ (0.07)
WEIGHTED AVERAGE SHARES 18,205,229 16,586,927
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Analysis of Stockholders' Equity (Unaudited)
For The Nine Months Ended September 30, 1999
Preferred Stock Common Stock Additional
------------------------ ----------------------- Paid-in Note Retained
Shares Amount Shares Amount Capital Receivable Earnings
------------ ---------- ----------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1996 107,546 $ 107,546 14,045,268 $ 140,453 $2,513,734 $ 0 $ (1,494,741)
Preferred B Shares Issued 175,154 175,154 963,347
Issue cost of Preferred B (547,999)
Conversion of Preferred B
Shares to Common (229,273) (229,273) 458,546 4,585 224,688
Common Issued to Bridge
Loan Investors 1,521,039 15,210 380,260
Conversion of Bridge Loans 132,652 1,327 429,791
Sale of Common Stock 200,000 2,000 98,000
Sale of Common Stock for
a Note Receivable 1,875,000 18,750 450,000 (468,750)
Net Loss for the Year Ended
December 31, 1997 (2,640,982)
------------ ---------- ----------- ---------- ----------- ------------ -------------
BALANCE DECEMBER 31, 1997 53,427 $ 53,427 18,232,715 $ 182,325 $4,511,821 (468,750) ($4,135,723)
Preferred Stock Conversions (11,000) (11,000) 22,000 220 10,780
Conversion of Bridge Loans 72,610 726 233,024
Reverse Sale of Common Stock
for Note Receivable (1,875,000) (18,750) (450,000) 468,750
Common Issued for Financing 3,400,000 34,000 (34,000)
Adjustment to Reflect Reverse
Split of Common of 1 for 5 (15,990,005)
Affiliate Debt Forgiveness 688,726
Net Loss for the Year Ended
December 31, 1998 (2,172,507)
Post Split Bridge Loan
Conversions 378,102 18,905 260,618
------------ ---------- ----------- ---------- ----------- ------------ -------------
BALANCE DECEMBER 31, 1998 42,427 $ 42,427 4,375,623 $ 218,780 $5,073,750 $ -0- ($6,308,230)
Conversion of Bridge Loans 62,500 3,125 46,875
Common Stock Issued Upon
Conversion of Bridge Loans
and Preferred Stock to
Equalize Prior Conversions 415,472 20,774 18,850
Common stock transactions
relating to settlement of
receivership:
Issued 2,750,000 82,500
Canceled (1,398,366) (69,918) (12,582)
Common stock purchase agreement
with Field of Cotton, L.P. 1,000,000 155,000 199,350
Common stock purchase agreement
with HTV 11,000,000 500,000
Loss for Nine Months Ended
September 30, 1999 (1,007,478)
------------ ---------- ----------- ---------- ----------- ------------ -------------
BALANCE SEPTEMBER 30, 1999 42,427 $ 42,427 18,205,229 $ 910,261 $5,326,243 $ -0- ($7,315,708)
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
5
<PAGE>
<TABLE>
<CAPTION>
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Cash Flow (Unaudited)
For The Nine Months Ended September 30,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS PROVIDED (USED)
BY OPERATING ACTIVITIES:
Net (Loss) $(1,007,478) $(1,076,940)
Adjustment to reconcile net income to net
cash from operating activities:
Cost of loan conversion to common stock 39,624 33,650
Depreciation 59,000 40,860
Amortization of leasehold 1,000 3,600
Trade credits receivable 30,000 20,000
Amortization of Senior Channel 103,452 103,452
Accounts receivable 1,700 (43,256)
Investment in common stocks 0 173,825
Accounts payable 108,422 33,829
Accrued interest 160,269 224,122
Advances from affiliates (20,300) 12,736
------------ ------------
TOTAL CASH USED BY OPERATING ACTIVITIES (524,311) (474,488)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in equipment (20,886) (19,625)
Investment in film library 0 ( 4,320)
------------ ------------
TOTAL CASH FLOW FROM INVESTING ACTIVITIES (20,886) (23,945)
------------ ------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Notes payable increase 8,450 577,903
Long term lease decrease (73,001) ( 96,093)
Common stock increase 550,000 0
Additional paid-in capital increase 304,350 0
------------ ------------
TOTAL CASH PROVIDED BY FINANCING ACTIVITIES 789,799 481,810
------------ ------------
Net Cash Increase 244,602 (16,623)
Cash, beginning of Period 9,807 34,768
------------ ------------
CASH AT END OF PERIOD $ 254,409 $ 18,145
------------ ------------
</TABLE>
The Accompanying "Notes to Financial Statements" Are
An Integral Part of These Financial Statements
6
<PAGE>
September 30, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - Consist of cash balances. Cash and Cash equivalents
consist of highly liquid investments with an original maturity date of ninety
days or less. The company does not have any cash equivalents.
TRADE CREDITS RECEIVABLES - The Company owns trade credits in the amount of
$357,128 at September 30, 1999 and $397,128 at September 30, 1998. As defined
by the International Reciprocal Trade Association, a trade dollar is a unit of
account that denotes the right to receive (receivable) or the obligation to pay
(a payable), one US dollar worth of goods and services within a barter system or
network. While all of the trade credits may be used by the company at any
time, the Company has shown a pattern of using $25,000 to $30,000 worth of the
credits in each of the past two years. Therefore the Company's trade credits
are being classified as current $30,000 and other assets of $201,990 at
September 30, 1999. The Trade Credits were obtained in 1994 in exchange for an
Investment in Common Stock and was valued at the fair value of the asset
investment in common stock. The Company uses the credits primarily for travel
expense. The Company, also exchanged Trade Credits for computer equipment and
Fine Art. Management does not consider impairment under FAS 121 is appropriate
as management intends to fully utilize the credits and the credits do not have
an expiration date. Due to the slow rate of usage the Company has established a
valuation account of $125,138. The trade group, the Company is a member of,
currently has over twenty four hundred participants.
ACCOUNTS RECEIVABLE - Allowance for doubtful accounts. The company has accounts
receivable at September 30, 1999 of $1,700 owed by regular customers.
Management deems this amount to be fully collectible. No allowances for
doubtful accounts is necessary. At September 30, 1998 the total was $45,506.
PLANT, PROPERTY AND EQUIPMENT is recorded at cost.
DEPRECIATION - The cost of plant, property and equipment is depreciated over the
estimated useful life of the assets ranging from equipment at 5 years to
leasehold improvements at 20 years. Depreciation is on a straight line basis.
Depreciation and amortization was $60,000 for the nine months ended September
30, 1999 and $44,460 for the nine months ended September 30, 1998.
INCOME TAXES - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers
all expected future events other than enactments of changes in the tax law or
rates. Income tax accounting information is disclosed in Note 3 to the
comparative financial statements.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
7
<PAGE>
OTHER INVESTMENTS - Consist of the following:
<TABLE>
<CAPTION>
1999 1998
-------- ----------
<S> <C> <C>
Prepaid media $447,047
Investment in stocks $ 0 22,630
Film Library 12,745 11,843
Investment in Senior Channel 448,292 586,228
-------- ----------
Total Other Investments $461,037 $1,067,748
-------- ----------
</TABLE>
NOTE 2 - NOTES PAYABLE
Notes Payable at September 30, 1999 consist of the following notes;
<TABLE>
<CAPTION>
Due Accrued
Creditor Date Interest Principal Interest
- --------------------------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Shelley Media
Marketing* 9/30/98 10% $ 97,229 $ 5,100
Cleveland
Broadcasting Co.* 9/30/98 10% 1,132 1,000
Pacific Acquisition
Group, Inc. 12/31/98 11% 250,500 38,825
Bridge Loan 10/31/97 15% 1,213,118 389,038
- --------------------------- ----------- --------- ---------- ----------
Total $1,561,979 $433,953
Advances from Other
Affiliated Companies Demand 10% 10,738 5,295
- --------------------------- ----------- --------- ---------- ----------
Total $1,572,717 $439,248
- --------------------------- ----------- --------- ---------- ----------
<FN>
* Affiliated Companies
</TABLE>
Notes Payable at September 30, 1998 consist of the following notes;
<TABLE>
<CAPTION>
Due Accrued
Creditor Date Interest Principal Interest
- --------------------------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
Shelley Media
Marketing* 9/30/98 10% $ 50,650 $ 3,799
Cleveland
Broadcasting Co.* 9/30/98 10% 6,829 1,000
ATN Network, Inc.* 9/30/98 10% 874,546 57,551
Pacific
Acquisition Group12/31/98 11% 250,500 18,787
Bridge Loan 10/31/98 15% 1,295,558 262,015
------------ ---------- ---------- ---------
Total 2,478,083 343,652
Advances from Other
Affiliated Companies Demand 10% 22,338 0
------------ ---------- ---------- ---------
Total $2,500,421 $ 343,652
------------ ---------- ---------- ---------
<FN>
* Affiliated Companies
</TABLE>
8
<PAGE>
NOTE 3 - INCOME TAXES
<TABLE>
<CAPTION>
Deferred income tax liability consist of the following components:
1999 1998
----------- -----------
<S> <C> <C>
Provision for Income Taxes:
Current 0 0
Deferred Liability 0 0
Less Provision for Income Taxes 0 0
----------- -----------
Total Provision for Income Taxes 0 0
----------- -----------
The tax effects of temporary differences
which give rise to deferred income by
assets and liabilities consist of the following:
1999 1998
----------- -----------
Deferred income tax assets:
Net operating loss 0 207,477
Valuation allowance 0 475,724
Deferred income tax liabilities
Installment sale method on Notes Payable 0 0
Valuation allowance (0) (207,477)
----------- -----------
Net deferred tax asset liability 0 475,724
----------- -----------
The Company has net operating losses (NOLs) at
December 31, 1998 of approximately $4,730,842.
These NOLs expire as follows:
2010 $ 70,912
2011 1,191,269
2012 635,367
2018 2,833,294
-----------
$4,730,842
-----------
The Company has capital loss carryover of $46,036
which will expire as follows:
2002 $ 14,238
2003 31,798
-----------
$ 46,036
-----------
</TABLE>
Realization of deferred tax assets associated with the NOLs and net capital loss
carryover is dependent on generating sufficient taxable income prior to their
expiration. Due to the uncertainty of the Company's ability to generate such
income with the possibility that these carryovers may expire unused, management
has established a valuation account against them.
9
<PAGE>
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
CASH USED FOR:
INTEREST $19,575 $70,266
INCOME TAXES $ 0 $ 0
</TABLE>
NOTE 5 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for where it is practicable to estimate that
value:
Notes Receivable - The carrying amount approximates fair value because each is
valued at estimated discounted future cash flows.
Long Term Investments - The fair value of these investments are estimated based
on quoted market prices for those and similar investments.
Notes Payable - The carrying value approximates fair value because of the short
maturity date of these investments.
The estimated Fair Values of the Company's Financial Instruments are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Long Term Investments $ 0 $ 0 $ 22,630 $ 20,065
Accounts Payable $ 490,977 $ 490,977 $ 210,233 $ 210,233
Equipment Lease
yments $ 211,382 $ 205,945 $ 295,694 $ 295,694
Notes Payable $1,561,979 1,561,979 $2,478,083 2,478,083
</TABLE>
NOTE 6 - LEASE OBLIGATIONS AND LONG TERM DEBT DISCLOSURE
The Company is obligated on three leases. The leases are as follows:
Building - The Company utilizes the spaces as both corporate offices and
studios. The lease is $6,350 per month and expired February 28, 2002.
Equipment - The Company has entered a master equipment lease (digital
compression equipment) for a period of thirty-six months ending December 31,
1999. The lease has a fair market value purchase option at the end of the
lease. Total lease obligation is $390,996 and the lease has been treated as a
capital lease. In May 1997, the Company entered into a lease for additional
digital equipment for a period of 36 months with payments of $4,302 per month.
The lease period is from June 1, 1997 to May 1, 2000. The lease has been
capitalized.
10
<PAGE>
Satellite - The Company leased satellite transponder space under an initial
operating lease. The lease is for three years ending July 31, 1999 with a total
lease obligation of $2,250,000. The Company has modified its lease reducing its
satellite band width from 24 MHZ to 8 MHZ which reduces its future lease cost
from $1,187,500 to $619,848 under the lease modification. The Company pays the
new lease balance at the rate of $30,000 per month during the period January 1,
1998 through July 31, 1999 when the lease terminates.
Details of lease obligations are as follows:
Capitalized Capitalized Operating
Equipment Equipment Transponder Building
Lease #1 Lease #2 Lease Lease
---------- ----------- ----------- --------
1999 $ 105,730 $46,730 $ 0 $ 18,100
2000 $ 18,706 $21,510 76,200
2001 $ 18,706 76,200
2002 19,050
NOTE 7 - RELATED PARTIES
The Company has engaged in transactions with certain other enterprises that are
affiliated companies. These companies are controlled by the management and
principal stockholders of American Independent Network. The controlled
companies transactions are as follows:
1999 1998
Funds Funds
--------------------------------------
Borrowed Repaid Borrowed Repaid
--------- ------- -------- --------
Cleveland Broadcasting $ 500 $ 0 $ 0 $ 19,260
San Antonio Broadcasting $ 0 $20,300 $ 0 $ 9,794
TV Channel 22 $ 0 $ 0 $ 22,500 $ 0
ATN Network $ 0 $ 0 $702,767 $112,462
Shelley Media Marketing $ 29,950 $18,000 $ 0 $ 450
NOTE 8- PREFERRED STOCK
Preferred stockholders' may convert one share of preferred stock into two shares
of common. Preferred stockholders' also receive nine percent interest per annum
in lieu of dividends. Summary of preferred stock transactions are as follows:
Number of Preferred B Shares outstanding at December 31, 1997 53,427
Number of Preferred B Shares converted to Common Stock
in 1998 at the rate of two common for each Preferred B,
which would equal 22,000 shares of common stock (11,000)
--------
Number of Preferred B Shares outstanding at December 31, 1998 42,427
--------
11
<PAGE>
NOTE 9 - SENIOR CHANNEL
The Company acquired the Copyright to the Senior Channel in exchange for
accounts receivable in the amount of $689,680 due to the Company from the owners
of the Senior Channel Copyright. The Senior Channel has twenty four hour
programming per day. There was no gain or loss recognized when accounts
receivable for the Senior Channel was converted into Investment in Senior
Channel. The Company's projections indicate that the cost will be recovered in
four to five years. The Company continues to evaluate this asset quarterly and
will amortize the cost over five years. The amortization during the Nine months
ended September 30, 1999 was $103,452 and the cumulative amortization at
September , 1999 was $241,388.
NOTE 10 - INVESTMENT IN COMMON STOCK
The Company owned 31,630 shares of Quick Tent, Inc. (NASD Small Cap QTNT)at
September 30, 1998. The Company sold Quick Tent, Inc. stock in 1998 resulting
in a loss of $31,748. This investment is included in Other Assets at September
30, 1998 at a value of $16,542.
NOTE 11- FILM LIBRARY
The Film Library consists of approximately 2,000 films and television produced
tapes at a cost of $12,745.
NOTE 12 - BRIDGE LOAN
In the quarter ended March 31, 1999, Bridge Loans in the amount of $50,000 were
converted into 62,500 shares of common stock of the Company at an average price
of $0.80 per share. In 1998 Bridge Loans in the amount of $333,750 were
converted into 450,731 Common Shares at an average price of $0.74 per share. An
additional 134,602 shares were issued to equalize the conversion price with the
market price in 1998, and 372,880 shares were issued to equalize the conversion
price with the market price in 1999.
NOTE 13 - RECONCILIATION OF CHANGES IN NOTES PAYABLE TO CASH FLOW GENERATED BY
INCREASE IN NOTES PAYABLE
Notes Payable 1998 $1,603,529
Notes Payable 1999 1,561,979
-----------
Net Change (41,550)
Notes paid by Conversion to Common Stock 50,000
-----------
Cash Flow generated by Note Payable $ 8,450
-----------
NOTE 14 - CAPITAL STOCK
During 1998, the Company declared a 1 for 5 reverse split in its common stock.
At the time of the reverse in November 1998, there were 19,987,526 shares
outstanding. After adjusting the outstanding shares for the 1 for 5 reverse
split, there were 3,997,521 shares outstanding.
12
<PAGE>
NOTE 15 - STOCK ISSUED FOR FINANCING
The Company issued 3,400,000 shares (680,000 post-split shares) of common stock
for no consideration for which the Company was to receive financing. As
financing has not materialized, the Company is in the process of retrieving the
stock.
NOTE 16 - DEBT FORGIVENESS BY AFFILIATE
An affiliated company forgave its debt from American Independent Network, Inc.
in the amount of $688,734 in 1998. Pursuant to Accounting Principal Board
Opinion Number 26, the amount was treated as a contribution to capital. There
was no tax effect as the Company has no tax asset or liability.
NOTE 17 - LEGAL MATTERS
The Company has had several judgments rendered against it. Judgments in place at
September 30, 1999 are as follows:
Judgment Entered For
--------------------
Witner, Poltraock, Giampietro $ 11,921
Hall, Estill, Hardwick & Gable 29,862
New Image Video 90,000
Ira Weingarten/Equity Communications 60,000
---------
$ 191,783
---------
These amounts have been accounted for in accounts payable.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
The following discussion should be read in conjunction with American
Independent Network, Inc.'s (the "Company's") financial statements and related
notes included elsewhere in this Report.
Information Regarding and Factors Affecting Forward-looking Statements
The Company is including the following cautionary statement in this Form
10-QSB to make applicable and take advantage of the safe harbor provision of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements which are
other than statements of historical facts. Certain statements in this Form
10-QSB are forward-looking statements. Words such as "expects",
"anticipates","estimates" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. Such risks and uncertainties are set forth below. The Company's
expectations, beliefs and projections are expressed in good faith and are
believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectation, beliefs or
projections will result, be achieved, or be accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause material adverse affects
on the Company's financial condition and results of operations: demographic
changes; existing government regulations and changes in, or the failure to
comply with government regulations; the loss of any significant numbers of
subscribers or viewers; changes in business strategy or development plans;
technological developments or obsolescence, and difficulties (including any
associated with the Year 2000); the ability to attract and retain qualified
personnel; significant indebtedness of the Company; the ability of the Company
to obtain acceptable forms and amounts of financing for current operations and
expansion; the demand for, and price level of, the Company's services;
competitive factors; evolving industry and technology standards; dependence on
key personnel. The Company has no obligation to update or revise these
forward-looking statements to reflect the occurrence of future events or
circumstances.
General
The Company was founded on December 11, 1992 and provides programming,
media production and syndication services to television arid cable stations, as
well as satellite uplink services to certain cable channels. The Company has a
wholly-owned subsidiary, Eureka Media & Trading, Inc., formed in the State of
Nevada on September 6, 1995, which has not commenced operations. In 1998, the
Company changed the name of its subsidiary to "Senior Channel, Inc."
14
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The Company originally broadcast its programs via analog transmission and,
in 1996, had Affiliate Agreements with over 150 Affiliate Stations. However, in
late 1996, the Company converted from analog to digital transmission and in
connection with the conversion, was required to provide digital decoding
equipment to each of its Affiliate Stations. Due to the cost of providing the
decoding equipment, the Company was not able to furnish the equipment to all of
its then existing Affiliate Stations. Accordingly, upon conversion, the Company
initially entered into Affiliate Agreements with 33 Affiliate Stations. The
Company has since entered into Affiliate Agreements to provide family-oriented
television to a network of 35 broadcast television stations and cable systems
nationwide. The stations serviced by the Company are primarily "independent"
broadcast stations, meaning that they have no affiliation with the major network
organizations (NBC; ABC; CBS; Fox; WB Network; and Paramount). The Company
maintains a library of over 2,000 programs covering a wide array of topics and
interests, and includes cartoons, sports, sitcoms, movies, news and weather,
comedy, science and health shows, documentaries, and public interest programs.
The Company also offers original programs, celebrity golf tournaments.
professional boxing, fishing expeditions and interactive programming.
Result of OperationsBNine Months Ended September 30, 1999 and 1998
Revenues
For the nine months ended September 30, 1999, revenues were $88,223 and for
the comparable nine month period in 1998, revenues were $228,545. The decrease
in 1999 revenues was due primarily to a decrease in 1999 in satellite channel
lease revenues.
Cost of Operations
For the nine months ended September 30, 1999 and September 30, 1998, cost
of operations were $582,189 and $500,608, respectively. The increase in cost of
operations for the nine months ended September 30, 1999, is due primarily to an
increase in production expenses and depreciation and amortization.
General and Administrative
For the nine months ended September 30, 1999 general and administrative
expenses were $212,429 and for the nine months ended September 30, 1998, general
and administrative expenses were $423,030. The decrease in general and
administrative expenses for the nine months ended September 30, 1999 is due
primarily to decreases in legal expenses, labor, telephone, transportation,
office supplies and sales tax.
Operating Loss
For the nine months ended September 30, 1999, the Company's operating
losses were $779,263 and for the comparable period in 1998, the Company's
operating losses were $743,702. The loss before income taxes and extraordinary
items for the nine months ended September 30, 1999 was $967,854 as compared to a
loss before income taxes and extraordinary items for the nine months ended
September 30, 1998 of $1,042,656. Net loss for the nine months ended September
30, 1999 was $1,007,478 as compared to a net loss for the nine months ended
September 30, 1998 of $1,076,306. The decrease in the loss before income taxes
and extraordinary item in 1999 is due primarily to a decrease in general and
administrative expenses and a decrease in other expenses being more than the
decrease in revenues (caused by the decrease in satellite channel lease
revenues). There was also an increase in cost of conversion of bridge loans
and preferred stock.
Net Loss
For the nine months ended September 30, 1999 and September 30, 1998, net
loss per share was $.06 and $.07, respectively.
15
<PAGE>
Liquidity and Capital Resources
The Company has financed its operations through a combination of the
issuance of equity securities to private investors, issuance of private debt,
loans from affiliates, and cash flow from operations. The Company has
cumulative losses of $7,315,708 from inception through September 30, 1999.
Current liabilities at September 30, 1999 were $2,715,762 which exceed
current assets of $285,497 by $2,430,265. Current liabilities at September 30,
1998 exceeded current assets by $3,173,475. The increase in current assets in
the third quarter of 1999 compared to the third quarter of 1998 was primarily
due to the increase in cash. The current liabilities at September 30, 1999
decreased compared to September 30, 1998 due primarily to decreases in notes
payable.
The Company has been able to generate funds from private placements to
finance operations, however, in the event the Company requires additional
capital investments, there can be no assurance that a sufficient amount of the
Company's securities can be sold to fund the continuing operating needs of the
Company.
Management believes that anticipated cash flows from operations will be
sufficient to meet the Company's expected cash needs and to finance future
operations, however, in the event that future revenues are not sufficient, the
Company will conduct private and/or public offerings of its equity stock or
enter into bridge loan financing to raise the necessary capital.
Impact of Inflation
Management does not believe that general inflation has had or will have a
material effect on operations.
Year 2000 Issues and Y2K
The Company has conducted a comprehensive review of its computer systems to
identify any business functions that could be affected by the "Year 2000" issue.
As the millennium ("Year 2000 or Y2K") approaches, businesses may experience
problems as the result of computer programs being written using two digits
rather than four to define the applicable year. The Company has conducted a
comprehensive review of its computer systems to identify those areas that could
be affected by the "Year 2000" issue. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. If not corrected, this could result in extensive
miscalculations or a major system failure.
The Company relies on industry standard software. Certain manufacturers
have already provided the Company with upgraded software to address the "Year
2000" issue and the Company believes that its remaining software manufacturers
will modify their programs accordingly. In the event the remaining
manufacturers do not upgrade their software packages, the Company will replace
such software with programs that address the "Year 2000" issue. The Company
believes that by modifying existing software and converting to new software, the
"Year 2000" issue will not pose significant operational problems and is not
anticipated to require additional expenditures that would materially impact its
financial position or results of operations in any given year.
16
<PAGE>
The Company is presently assessing its Year 2000 compliance status and the
status of its hardware and service providers and its network affiliates. Based
on these assessments, management believes that significant exposure does not
exist with respect to known third parties.
However, since the Company's revenues are materially dependent on each network
affiliate being able to use their own technology systems to broadcast, there can
be no assurance that the Company will escape the consequences of a Year 2000
compliance deficiency.
Year 2000 Contingency Plans. In the event that the Company's computers
ultimately are shown not to be Y2K compliant, the Company will seek to make its
software compliant.
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
The following unregistered share issuances were effectuated by the Company
in reliance upon exemptions from registration under the Securities Act of 1933
as amended (the "Act") as provided in Section 4(2). Each certificate issued for
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities. No underwriter participated in,
nor did the Company pay any commissions or fees to any underwriter in connection
with any of these transactions. None of the transactions involved a public
offering. These issuances were the result of negotiations between the Company
and the shareholders. Each certificate issued for unregistered securities
contained a legend stating that the securities have not been registered
under the Act and setting forth the restrictions on the transferability
and the sale of the securities. The Company believes each person had knowledge
and experience in financial and business matters which allowed them to evaluate
the merits and risk of the purchase or receipt of these securities of the
Company. The Company believes each person was knowledgeable about the
Company's operations and financial condition.
On September 2, 1999, American Independent Network, Inc. (the "Company")
closed a transaction (the "HTV Transaction") whereby the Company issued and sold
11,000,000 shares of its common stock to Hispano Television Ventures, Inc.
("HTV") for $500,000 in cash. The Company believes that HTV issued
convertible debt to pay for the shares. HTV now owns approximately 57.9% of
the presently outstanding shares of common stock of the Company, which
represents a change in control of the Company.
17
<PAGE>
ITEM 5. OTHER INFORMATION.
In August, 1999, the Company entered into an Asset Transfer Agreement
(the "Asset Transfer Agreement") with Hispano Television Ventures, Inc.
("HTV") whereby HTV agreed to pay certain obligations of the Company
totaling $82,500, and the Company agreed to repay this amount to HTV on or
before August 20, 1999 and to give HTV eight months of free use of the
satellite uplink equipment and the satellite transponder, both of which the
Company leases from third parties. The Asset Transfer Agreement provided
that if the Company does not meet the terms of the Asset Transfer
Agreement, then the Company is obligated to immediately transfer and
assign to HTV: (i) the leases to the uplink equipment and the satellite
transponder; and, (ii) the Company's FCC Radio Station Authorization (the
"Earth Station License"), which was granted to the Company in 1997. The Earth
Station License authorizes the Company to build and operate a domestic fixed
transmit/receive C-band earth station uplink system on the Company's
premises. The Earth Station License expires in July, 2007. The Company
has not yet built the earth station uplink system. The Asset Transfer
Agreement provided that if the asset transfer is effectuated, HTV would
allow the Company to use the transferred assets for a satellite usage fee of
$22,500 per month, with one month of free usage, and the Company would be
able to continue providing its programming to its network affiliates. The
leases to the uplink equipment and the satellite transponder, and the Earth
Station License are material and major assets of the Company. Although the
Company did not repay HTV, the asset transfer has not been effectuated at this
time. As part of the HTV Transaction, HTV will assist in the management of the
operations of the Company on a interim basis.
In October, 1999, the Company and HTV entered into a merger agreement which
is subject to approval by the shareholders of the Company and HTV. Under the
terms of the merger, HTV would merge into the Company, the assets of HTV would
become the assets of the Company, and the shareholders of HTV would receive a
total of 70,000,000 shares of American Independent Network. As discussed above,
HTV previously purchased 11,000,000 shares of common stock from the Company for
$500,000 in cash. Pursuant to the terms of the merger, these 11,000,000 shares
would be returned to the Company as treasury stock or for cancellation
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K dated September 2, 1999 which reported
Item 1. Changes in Control of Registrant, Item 2. Acquisition or
Disposition of Assets and Item 5. Other events.
18
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
American Independent Network, Inc.
November 12, 1999 /s/ Randy Moseley
______________________________
Randy Moseley
Director and Chief Financial Officer
19
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted from (A) Audited
Financial Statements for quarter ended September 30, 1999 and Is Qualified in
its Entirety by Reference to Such (B) Quarterly Report on Form 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 254409
<SECURITIES> 0
<RECEIVABLES> 1088
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 285497
<PP&E> 1002945
<DEPRECIATION> 253008
<TOTAL-ASSETS> 1714978
<CURRENT-LIABILITIES> 2715762
<BONDS> 0
0
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<COMMON> 910261
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<TOTAL-LIABILITY-AND-EQUITY> 1714987
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<TOTAL-REVENUES> 88223
<CGS> 418737
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<INCOME-PRETAX> (967854)
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